ANDHRA PRADESH HIGH COURT
V. Srinivas, J.
N. Narsimha Reddy – Appellant
versus
P. Ravindra Reddy – Respondent
First Appeal Nos.336 and 432 of 2006
Decided on 3.4.2024
(A) Civil Procedure Code, 1908 – Order 37 Rule 1 – Partnership Act, 1932 – Section 69(1) – Recovery suit – Promissory Notes – Suit transaction relates to partnership business, plaintiff and defendant are partners and promissory notes were executed in connection with business – A Partner cannot file suit with regard to business transaction, except to seek rendering of accounts and dissolution of Partnership – More so, when there is a memorandum of understanding regarding business, plaintiff instead of invoking conditions in memorandum of understanding seeking relief of decrees on promissory notes without any consideration does not arise – Trial Court rightly appreciated material on record and categorically found that in view of memorandum of understating suit promissory notes become unenforceable and plaintiff is at liberty to enforce contract covered under memorandum of understating – No grounds to interfere with well-articulated common judgment and decrees of Trial Court. (Paras 28 and 67)
(B) Civil Procedure Code, 1908 – Order VI Rule 1 – Pleadings – When evidence is not in line with pleadings and is at variance with it, it cannot be looked into because parties cannot travel beyond pleadings. (Para 65)
Result: Appeals dismissed.
JUDGMENT
These regular appeals under Section 96 Code of Civil Procedure are directed against the decrees and common judgment in O.S.Nos.14 of 2005 and 27 of 2003 dated 04.04.2006 on the file of the Court of learned IV Additional District Judge, Kurnool.
2. The appellant herein, before the trial Court, is the plaintiff and he filed both the appeals. The respondent herein is the defendant in both the suits. For the sake of convenience, the parties hereinafter referred to as they arrayed before the trial Court.
3. The plaintiff instituted the suits against defendant for recovery of an amount of Rs.8,59,333/- and Rs.10,11,656/- with interest and costs basing on the promissory notes dated 01.01.2001 and 01.12.2000 respectively said to be executed by the defendant.
4. Before adverting to the material and evidence on record and nature of findings in the judgment of the trial Court, it is necessary to scan through the case pleaded by the parties in their respective pleadings.
5. The case of the plaintiff/plaintiff in brief in the plaint in both the suits was as follows:
(i) On 01.12.2000, defendant borrowed a sum of Rs.6,00,000/- from the plaintiff by executing a promissory note and agreed to repay the same with interest @ 24% per annum, which is the subject matter in O.S.No.27 of 2003.
(ii) On 01.01.2001, defendant again borrowed a sum of Rs.5,00,000/- from the plaintiff by executing a promissory note and agreed to repay the same with interest @ 24% per annum, which is the subject manner in O.S.No.14 of 2005.
(iii) In spite of repeated demands and legal notices, the defendant failed to repay the said amounts. Hence, the suits.
6. The respondent/defendant denying the allegations in the plaint and contending in the written statement in both the suits as follows:
(i) The plaintiff is the husband of his elder sister. During the year 1992, plaintiff migrated to Kurnool and stayed along with the defendant and both of them started a bread factory under the name and style of “S.V.Foods”. The said business stands in the name of defendant, actually, it was a partnership business and they carried the said business.
(ii) Since both of them are family members, they were using the partnership amounts to meet their respective personal expenditure besides the family expenditure.
(iii) During the month of December 2000, plaintiff developed some selfish interest and requested the defendant to give in writing about the share in S.V.Foods.
(iv) As M/s. S.V. Foods obtained a loan from A.P. State Finance Corporation, the rights in the partnership could not be transferred. But the defendant accepted to commit himself to recognize the rights of the plaintiff in the said business by executing a promissory note for Rs.6,00,000/- on 01.12.2000.
(v) In spite of execution of promissory note conferring some right against the defendant, the plaintiff did not satisfy with the amount mentioned in the said promissory note and applied pressure on the defendant through his sister, who is wife of plaintiff. On that, he executed another promissory note dated 01.01.2001 for Rs.5,00,000/-. Both the promissory notes are executed in lieu of acknowledgment of the right of the plaintiff in the business only. The attestors found in the suit promissory notes signed it subsequently, just before filing the suit.
(vi) In spite of execution of said promissory notes, the plaintiff did not satisfy and made pressure on the defendant to create right in the factory. Unable to bear the pressure, defendant executed a registered sale deed, dated 12.06.2001 transferring approximately 40% of the area in the name of the plaintiff showing boundaries of the factory in the sale deed.
(vii) Then, the defendant requested the plaintiff to return the promissory notes, but he informed him that the same were misplaced and promised to return them as and when they are traced. Unfortunately, the wife of the plaintiff died suddenly due to blood cancer on 05.01.2003.
(viii) After death
(1) A Partner cannot file suit with regard to business transaction, except to seek rendering of accounts and dissolution of Partnership.(2) Pleadings – When evidence is not in line with pleadings and....
The court affirmed that promissory notes executed without consideration are unenforceable, especially when superseded by a valid memorandum of understanding.
The appellate court found the promissory note invalid due to lack of consideration and conflicting evidence, leading to the dismissal of the plaintiff's suit.
The plaintiff's failure to disprove the defense taken by the defendant and the finding of the suit promissory note as not true and valid influenced the court's decision.
The admission of execution of a promissory note shifts the burden of proof to the defendant to prove that no consideration was passed.
The validity of a promissory note is upheld when the burden of proof for coercion and lack of consideration is not met by the Defendants.
The presumption of consideration under Section 118 of the Negotiable Instruments Act applies once execution of the promissory note is established, placing the burden on the Defendant to rebut this pr....
The presumption of consideration under Section 118-A of the Negotiable Instruments Act applies unless disproven by the defendants.
The court reaffirmed that the burden of proof regarding the authenticity of a promissory note lies with the party alleging forgery, and the evidence must be evaluated on the preponderance of probabil....
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